Posts

Whether you are storing your money in a bank account or a safe deposit box, both are under the security of a bank. This is where the similarities between the two end.

 

Bank accounts are the preferable means of storing money for both customers and the bank. The customers can withdraw the funds in bank accounts at any time. And the banks are at an advantage here as they can use the money in their own activities and investments and give it back when the customer withdraws it. Check out America's Best Bookkeepers

Safe deposit boxes, also known as lockers, are used by people who want to store valuables such as paintings, jewelry, other valued items, and sometimes cash.

 

Here is a comparison of safe deposit boxes (lockers) and bank accounts:

Safe Deposit Box (Locker)

Advantages

  • It can be used to store gold bars, jewelry, collectibles, and any other valuables; unlike bank accounts, you can’t just withdraw or deposit cash.
  • Harder to break into and are kept under maximum security in the bank behind numerous locks, an automated door, CCTV, and of course, the bank guards. Furthermore, no one is allowed to access these lockers without keys that are only in possession of the locker’s owner and bank manager.
  • It can be emptied of their contents and valuables, all in one go.
  • Much safer than other options and are only at risk at the time of a robbery. Check out America's Best Bookkeepers

 

Disadvantages

  • No one, not even the owner, can access the locker without owner and manager’s keys.
  • If you rent a safe deposit box at a bank, you will be charged a fee for the security and maintenance of your locker and everything in it.
  • Unless you have cash in your locker (which can only be accessed during the banks operating hours), this asset is considered to have low liquidity.
  • Record of the money in bank accounts can be tracked and valued in bookkeeping, but there is no record of the items that are kept in the locker, to maintain the owner’s

 

Bank accounts

Advantages

  • Bank accounts have high liquidity, and the money in it can easily be withdrawn, or you can easily make payments through pay orders, checks, and
  • Money can be withdrawn from the bank through checks during working hours, or through ATMs at any time.
  • Bank pays interest (higher interest rates on savings accounts in comparison to current accounts) on the money in your account as they invest it or loans it, other No matter what, you can withdraw your money at any time. Check out America's Best Bookkeepers

 

Disadvantages

  • There is a specific cycle limit or per day for withdrawal, which cannot be exceeded through ATM. The cycle limit depends on the type of account you have and the bank you have your account in.
  • Transactions can be made by anyone using your debit and credit cards, which makes this unsafe. If your credit card (linked to the bank account) is stolen, they can easily make transactions through it, and you would still be liable for them. If your debit card is stolen, then it is harder because they will have to know your pin to make withdrawals from ATMs, unless it is a VISA or MasterCard that can be swiped like a credit card.
  • Online scammers can easily target bank account and credit card information.

 

 

Now that you know all the possible pros and cons of both lockers and bank accounts, which do you think is preferable for you?

 

In our opinion, if you want to save cash or mostly do money transactions, then opt for a bank account; but if you’re going to safeguard something else like gold bars or some important documents, then go for lockers. On a side note, if you are storing important documents in the locker, then keep a copy of them with you just in case.

Check out America's Best Bookkeepers About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity. Check out America's Best Bookkeepers

Pile with american hundred dollar bills isolated on white background
No matter how the economy fares, banks rarely go into a deficit. Despite lending billions of dollars, banks are always thriving. That is possible because they have mastered the game of currency and finances. Hoarding cash used to be the oldest trick in the hat. As interest rates go down, banks start to store cash to save themselves from a massive blow. It seems like they always have a backup plan.

It wasn’t too long ago that many European countries, including the UK, introduced the concept of negative interest rates which means that banks had to pay money to lend money to the government trying to get out of recession. This basically means that not lending costs more than lending. The governments were trying to push start the lending game despite the recession.

So, how did the banks get out of the sticky situation? Simply by storing cash.

Why Do Banks Store Cash?

Banks store cash to avoid a negative interest situation. When there is a risk of interest rates going below 0, financial institutes are unable to make any profit on lending. That is when most of them stop lending, creating a further risk for the overall economy. Two years ago, the government, like in the UK, tried to overcome this situation by making not-lending even more expensive, i.e. by charging a levy on the funds held by the banks. That is when storing cash can turn in the favor of banks. By storing cash, we mean hiding piles and piles of it.

How Much Cash Was Stored in Europe?

It is estimated that, during 2016, European banks actually hid billions of worth in cash to avoid lending during the negative interest rate period.

Now, this may take you back to the good old Bond movies with villains transporting their fortune in huge trucks and sending them to secret caves. This may sound like a vile scheme from the banks, but storing cash actually makes sense. Taking a look at what actually happened in Europe, let’s start with some hard facts and figures. Private sector banks in Europe were paying around 0.4 percent annual levy on the funds they kept. This policy cost the banks more than 2.5 billion euros in just two years. On the other hand, the government introduced an incentive to encourage lending to businesses and start-ups. Still, the policies weren’t working in favor of private sector banks.

The easiest way for the banks to hide their funds from the government was to turn the traceable electronic money into hard cash and hide it somewhere it cannot be found by the feds. Munich Re, a known German lender, has said to have stored millions of euros. A few other lenders followed suit but they were soon denied massive cash withdrawal in order to prevent further distress.

Why Did Storing Cash Not Work?

At the time it happened, it seemed like the smartest way out. It was, however, a lack of foresight on the lender’s part. Storing cash in huge volumes accompanied excessive costs that weren’t initially considered. One of the main costs was transport and storage itself. While many lenders were able to manage that cost, there was another disaster in the waiting. The insurers weren’t willing to insure a huge amount of money in hard cold cash form.

According to most financial analysts, the insurance cost was around 1 percent of the total worth of the cash stored. This means that the total cost of storing cash piled up much higher than the negative rate being charged by the European Central Bank.

The Takeaway

The strategy didn’t work as most banks expected. Hoarding or storing cash doesn’t bid well in anyone’s favor.

Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

Trading graph on the cityscape at night and world map background,Business financial concept
To be considered a top tech savvy bank, there are certain traits that must be adopted. Along with other traits, a top tech savvy bank must have excellent bookkeeping skills. Bookkeeping will help these banks generate all of their required and significant information from which their accounts will be formulated. The process of bookkeeping is a recognized and well-defined process in the field of business and accounting. Each and every transaction, whatever the nature, has to be recorded. The process of bookkeeping helps ensure accurate and timely records.

These are some of the traits that a top tech savvy bank should have:

  1. They are Exactly where their Customers want Them to Be

Today’s generation has no desire to head over to their bank branch. They wish to simply use their mobile phones. This is the reason why mobiles have become the fastest growing podium in the field of banking.

  1. They can Provide Fast Services

A top tech savvy bank should have better and faster banking software systems. The better the system is, the more nimble the bank will be. These banks should be launching new services and products that takes them days, not months, to produce.

This also means that the speed and rate of customer fulfillment and satisfaction is intensely faster. This should especially be implemented in the banks that run both back and front offices on the exact same platform. Let us take an example of this scenario. A customer can open up a customer account, disburse the funds to its other customers, and make a financial decision… all in 60 seconds.

  1. They are Accessible

Another gain for top tech savvy banks is that integrated, modern IT systems allow them to take IT economies of scale while they are growing – whether inorganically or organically. IT systems are created to be accessible and scalable as well as the ability to handle huge amounts of new information.

This means that, on every occasion, a top tech savvy bank can easily and quickly transfer their customer data right onto their own systems.

  1. They Deliver a Pleasing User Experience

When it comes to the question of technology, bank customers can be more demanding. This is because they want easy accessibility with top-notch security, along with a personalized experience.

The most advanced and top tech savvy banks have started to move from offering transaction services towards assisting and facilitating their customers to make sure that they make smarter commercial and financial decisions. Not just that, they wish to introduce the right services to their customers on the right device at the right time.

Technological capabilities help top tech savvy banks monitor their customer’s activities, study them, and help them make suitable offers. The best of these top tech savvy banks provide first-rate security without having to disturb their customer experience. These types of banks use applications to understand and analyze exactly how their customers are using a device to offer background levels of verification.

  1. They have an Influence on the Power of Ecosystems

The most advanced top tech savvy banks are now also considering working with third parties. They influence the authority of the crowd in order to benefit them to update faster and provide a wider range of services and products to their customers.

Let us take an example of this scenario. A top tech savvy bank can open up a library of Application Programming Interfaces (APIs) to companies and developers, offering complementary solutions.

Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

 

Business People meeting Planning Strategy Analysis Concept
Before banks decide to grant you a loan, they take all of the financial aspects of a business, including its financial statements, into consideration. The balance sheets, income statements and cash flow statements are major documents to be reviewed by the bank because they are liable to safeguard their shareholders’ capital and comply with regulations. They also need to prepare for the worst as the borrower might go bankrupt, which makes recovery of the loan extremely difficult. Therefore, before extending credit, banks thoroughly go through the financial statements of individuals and businesses to ensure the repayment of a loan.

Income Statement

An income statement breaks down the sales and expenses of a company into all its components and also highlights the net profit. By carefully analyzing the income statement, banks try to figure out the expenses that go into making a certain product or service, including direct and indirect expenses. Before extending credit, financial experts, hired by banks, go through the income statements to find out if a firm invests in premium products with low volume or indulge in high volume sales at a discounted price. All of this information is necessary to determine if the business under scrutiny is sustainable over a long period of time or if it is just another hopeful venture that falls into oblivion, like many others.

Cash Flow Statement

For a banker, it’s valuable to assemble creditworthiness of data from balance sheets and income statements. However, the eventual goal is to measure the cash flows of the borrower. By reviewing liquidity arrangements, the bank ensures that the company has a steady influx of cash and that it is eligible for extending credit. A cash flow statement offers an understanding of a company’s liquidity movements in operating, investing and financing activities.

The flux of cash, whether in or out, can be because of past actions by the company. Therefore, cash flow is carefully analyzed by the bank. If there is any loan that was taken previously, it would show in the cash flow. Basically, the goal of the bank is to see if you have enough cash resources to run the business and pay off the loans at the same time. Banks actually like extending credit to clients that have a positive cash flow statement because, to run their business, they require people and businesses that are in need of a loan. So, it ultimately serves their own interest as well.

Balance Sheet

The balance sheet of a company shows what the company owns and what it owes in the form of liabilities. The assets of a company, which include land, machinery, cash, and other intangible assets, are analyzed to judge the worth of a business. Any loans and accounts payable fall under liabilities that need to be paid off by the company. Information about equity and stockholders is also included in the balance sheet and, before extending credit, banks go through that information to find the liable parties in case of a nonpayment. Also, the assets of the business are the first items to be disposed of by the bank if the business fails to repay the loan. A balance sheet offers a detailed description of a business and is the most vital source of information used by banks and other stakeholders.

Other Considerations Before Extending Credit

Most of the information about a company will come from these above statements. However, there are always some details that remain hidden from these reports and are sought after by the bank. For example, if a company has been involved in a lawsuit or any other judicial proceeding, the information will not be present in the statements. To tackle that, banks go through extensive research about the company operations and sometimes even conduct interviews with company’s management and employees to better understand the situation. In short, banks take all possible measures before extending credit to ensure its full repayment with interest.

Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.